For a startup, cash is oxygen — profitability is often years away, but running out of cash is immediate and fatal. Burn rate and runway are the two metrics every founder should know cold, the same way a pilot knows fuel remaining and consumption rate. Getting this calculation slightly wrong, or simply not tracking it closely enough, is one of the most common (and avoidable) reasons startups fail even when their underlying product or market is sound.

Gross burn tells you how expensive your operation is to run, full stop. Net burn tells you the actual rate your bank balance is shrinking, accounting for whatever revenue is coming in. A startup with $200,000/month in expenses and $150,000/month in revenue has a gross burn of $200,000 but a net burn of only $50,000 — a much healthier picture, and the number that actually determines how long your cash will last.

A startup with $900,000 in the bank and a net burn of $60,000/month has a runway of $900,000 / $60,000 = 15 months. This is the single most important number a founder reports to their board and uses to time fundraising — most experienced investors recommend starting a fundraise when you have at least 6 months of runway remaining, since raises commonly take 3-6 months from first pitch to wired funds, and you don't want to be negotiating from a position of desperation with weeks left on the clock.

A startup spending $400,000 net per month while adding $200,000 in net new ARR has a burn multiple of 2x — for every dollar of new annual recurring revenue generated, it's spending two dollars. This single metric has become one of the most-watched efficiency indicators among venture investors since the funding environment tightened in 2022-2023, replacing pure growth-at-all-costs thinking from the prior decade.

There's no universal "good" burn rate — context matters enormously. A well-funded Series B company intentionally burning $1M/month to capture a land-grab market opportunity, backed by strong unit economics and a clear path to profitability, is in a completely different situation than a seed-stage startup burning the same amount with no clear product-market fit. The right question isn't "is my burn rate high" but "is my burn rate buying me proportionate, durable progress."